Letter: Cut Taxes, Rein in The IRS

Tuesday

Sep 12, 2017 at 4:17 PM

President Donald Trump promoted his tax cut plan in Missouri recently, highlighting how it would bring much needed relief to hardworking taxpayers across the country.

As the President of Dynalab Inc., an electronics manufacturing company based near Columbus, Ohio, I can say first-hand that tax cuts would allow us to give raises, hire associates, expand our business, and generally be more competitive in the global economy.

But lower rates would also do something else important that President Trump, Congressional Republicans, and the public overlook: rein in the IRS.

We learned the hard way how much power the IRS holds. In January, we received a letter from our bank saying the IRS had levied on a bank account for a supposed payroll tax violation.

On further investigation, we discovered the IRS had mixed up one of our tax ID numbers with a different company based out of New Jersey.

Honest mistake? Probably. But what is more worrisome than the IRS failing to cross-reference our address and Tax ID number was the fine print on the back of the IRS Release of Levy, Form 668-D, which states that the IRS can hold property for up to nine months, even if it knows the property was taken in error.

This vast power of the IRS to seize and hold bank accounts for up to nine months, even if known to be done in error, could have ruinous effects on any small business or family. Without access to funds, bills cannot be paid nor payrolls met. More broadly, this power seems clearly in violation of the U.S. Constitution’s Fourth Amendment: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated…”

The IRS’s broad power to seize property without due process makes it perhaps the most powerful part of the federal government. “The power to tax,” said former Chief Justice John Marshall, “is the power to destroy.”

Our story is just one example of IRS abuse. Many other small businesses have also been on the receiving end. The Institute for Justice estimates the IRS seized more than $242 million from private citizens in more than 2,500 cases between 2005 and 2012 – at least one third of which arose from nothing more than repeated financial transactions under $10,000, ostensibly an IRS marker of criminal activity.

In August 2013, Carole Hinders, owner of a Mexican restaurant in Arnolds Park in northwest Iowa, had $33,000 seized from her checking account by the IRS because she had made frequent small deposits. She pointed out that her restaurant only accepted cash. She was never accused of a crime. “It’s been a year from Hell,” Hinders said. “I decided to fight this fight because I didn’t do anything wrong. They took my money and I don’t think they should have the right to do that.”

In February 2012, Randy Sowers, owner of South Mountain Creamery in Frederick, MD, had more than $60,000 seized by the IRS for so-called “structuring” violations, making repeated deposits under $10,000. Sowers highlighted how he was simply depositing earnings from selling milk at local farmers’ markets and had done nothing wrong.

In April 2013, IRS agents seized nearly a million dollars from the bank account of Andrew Clyde, a Navy veteran who served in Iraq and had started a small firearms store in Athens, GA. Clyde chalked his frequent deposits up to the fact his insurance policy only covered losses up to $10,000, so the store policy was to not ever hold more than $10,000 cash. “I did not serve three combat tours in Iraq only to come home and be extorted” by the IRS, said Clyde.

The best way to check IRS power is by passing legislation to limit it. Short of that, tax cuts and simplification are the next best option because this would eliminate the current Byzantine system that empowers the IRS. No member of Congress would likely acknowledge that they agree with this kind of power, yet they know of it and do nothing about it.

Founding Father and first U.S. Treasury Secretary Alexander Hamilton warned in 1782, “Whatever liberty we may boast in theory, it cannot exist in fact while [arbitrary tax] assessments continue.” Tax cuts and tax simplification can reduce the power of the IRS while increasing the liberty of hardworking taxpayers.